GAN reveals revenue decline in Q1 as strategic review continues

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Announced after the group posted its 2022 full-year results in March, the review has been looking at a “range of strategic alternatives” that could improve value for shareholders in GAN.

While the review remains ongoing, chief executive Dermot Smurfit said he was “pleased” with the progress made so far, adding that a recent $30.0m (£23.8m/€27.5m) loan from Beach Point Capital affiliate BPC Lending I LLC helped improve its financial position.

“We are progressing in our strategic alternatives review to evaluate the opportunities available to us maximise shareholder value,” Smurfit said. “Our recent announcement and term loan transaction bolstered our financial position and allowed us to modify the conditions of our term loan, significantly reduce our interest expense, and strengthen our balance sheet. 

“To be clear, this transaction should be viewed as a key step in the broader review process, but important one that allows us to evaluate the options available to us from a stronger position. 

“Overall, we have been pleased with the nature of the strategic review up to this point, and we will provide updates as appropriate as the process unfolds. At present, there is no timetable for the completion of that process.”

Q1 results

Revenue for the three months to 31 March amounted to $35.1m, which was down 6.4% from $37.5m in the same period last year.

B2C remained GAN’s primary source of revenue during the quarter, but the $23.9m posted was 2.1% lower than $23.9m in the previous year primarily due to the weakening of the currencies in which the group derives its B2C operations’ revenues relative to the US dollar.

Revenue from B2B activities also declined 13.7% to $11.3m, mainly as the result of a drop in contractual revenue rates of GAN’s largest B2B customer. However, GAN said that the effects of the decrease were partially offset by overall growth in the B2B segment due to the strong performance of its largest B2B client, with gross operator revenue in B2B up 42.0%.

Turning to costs, total operating expenses for the quarter were 12% lower at $41.1m, while after also including the impact of $9.3m in additional profit, minus $1.7m worth of interest expenses, this left a pre-tax profit of $1.6m, compared to a $4.1m loss in 2022.

GAN paid $74,000 in income tax during the quarter, resulting in a net profit of $1.5m, in contrast to the $4.5m loss posted at the same point last year. However, adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) was 98.7% lower at $39,000. 

“Our first quarter showed another strong quarter of underlying KPIs for both our B2B and B2C businesses and B2B gross operator revenue and active customers, deposits, and turnover in B2C remain very encouraging,” Smurfit said. 

“We also expect our deliberate efforts to reallocate capital and other resources toward our highest return opportunities to yield improved financial results in 2023 as we lean into GAN Sports in the US and select international markets for B2C where we are best positioned and see reasonably attainable paths to profitability.”

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